Candice owns a mutual fund that reinvests her dividends and capital gains earned during the year. The mutual fund reported to her that her share of earnings was: $500 in dividends, $1,500 in short- term net capital gains, and $1,300 in long- term net capital gains. She reported the items on her tax return and paid the appropriate tax on these earnings. If her basis in the fund was $25,000 at the beginning of the year, what is her basis at the end of the year?

Question

Quizplus · Accepted Answer

Candice's basis in the mutual fund increases by the amount of reinvested dividends and capital gains. Her basis at the end of the year is $25,000 + $500 (dividends) + $1,500 (short-term gains) + $1,300 (long-term gains) = $28,300.

Candice Owns a Mutual Fund That Reinvests Her Dividends and Capital